Attorney’s ties to firms at issue in PG&E case

A 2017 wildfire survivor sought to persuade PG&E Corp.’s bankruptcy judge on Tuesday to make a key attorney in the case provide a better disclosure about his ties to Wall Street financiers.

San Antonio lawyer Mikal Watts, who represents thousands of fire victims, has admitted that two financial firms connected to the PG&E bankruptcy also had stakes in a $100 million loan he took out for his law practice. Watts told his clients about the issue at town halls in December, but Will Abrams, who lost his Santa Rosa home in the

2017 Tubbs Fire, has pushed for more.

Abrams wants tens of thousands of fire victims to receive a written disclosure about the financial issues raised by Watts to provide them with enough information to vote — or change their vote — on PG&E’s plan to exit bankruptcy. A 2018 Camp Fire survivor sided with Abrams in court through her attorneys.

The efforts threaten to greatly complicate the highstakes voting on PG&E’s bankruptcy plan that is supposed to conclude on Friday. PG&E is also trying to resolve the whole case by June 30, its statemandated deadline to access what is essentially a new form of corporate wildfire insurance.

U.S. Bankruptcy Judge Dennis Montali did not rule on Abrams’ request at a telephonic hearing on Tuesday but said he would address the matter as quickly as possible.

“The shortterm interests of investors have clearly taken precedence over the safety and security interests of victims and the public,” Abrams said at the hearing.

He said Watts’ connection to the financial firms, Apollo Global Management and Centerbridge Partners, had “profoundly” affected the case and the $13.5 billion settlement deal that fire victims are considering as they vote. To bolster that claim, Abrams pointed to Watts’ admission that he chose to negotiate with other investors after he learned that Apollo and Centerbridge had stakes in his law firm loan.

Watts has insisted he did nothing wrong and that the two investors have no control over his legal decisions. Apollo holds more than $600 million of PG&E debt and insurance claims against the company, while Centerbridge held about $496 million of PG&E debt and insurance claims as of late last year, according to court papers. Centerbridge is also a PG&E shareholder.

But they were “bit players in the negotiation,” Watts said at the hearing. He also stressed that many other lawyers who represent fire victims were involved in negotiations over the settlement deal.

“This was not Mikal Watts meeting in a secret room,” he said.

Watts said his connection to Apollo and Centerbridge posed no conflict and described his critics as trying to garner media attention to “slow down the vote.” Apollo previously said it can’t influence what Watts “decides is best for his clients,” and Centerbridge declined to comment on the matter.

But Montali, the bankruptcy judge, indicated that his primary concern is whether Watts made an appropriate disclosure of the issue when he discussed it at a town hall and then disseminated that conversation to his clients electronically.

“The issue isn’t the nature of how he borrowed money,” Montali said. “The question is, does Mr. Watts put himself in a position where he at least needs to tell his clients that there is this relationship?”

Abrams isn’t the only one who continues to raise concerns about the PG&E bankruptcy as it approaches its targeted conclusion.

San Jose Mayor Sam Liccardo and a coalition of more than 200 other local government officials sent a letter dated Monday to the California Public Utilities Commission citing “serious concerns” about a proposed decision that would have the regulators approve PG&E’s bankruptcy plan. The letter said the plan would saddle PG&E with too much debt and urged the commission to condition its approval on the company securing more equity commitments.

Liccardo and the other officials have proposed turning PG&E into a customerowned cooperative similar to a credit union. But their idea, which has no committed financing, has so far not gained traction in court or with regulators.

PG&E said in a statement that the letter contains “many inaccuracies” that the company would address to the commission directly. The company said it is positioned to be financially healthy after the bankruptcy concludes.